Traders in all financial markets always look to make Forex trading maximum profit. One indicator that’s certainly ahead of others is Bollinger Bands. This indicator has been well ahead of others in terms of profit.
Bollinger Bands is an indicator that measures how high or low prices are in relation to volatility. Now this is very useful that’s because volatility is the main thing when it comes to financial markets. Traders always look to take advantage of volatile situations in the market. Therefore an indicator that works well with volatility is very useful. It will enable traders to make maximum profit in Forex trade.
Use of SMA
Now one very important feature of Bollinger Bands is how it combines other indicators. Most traders will know how useful moving average is. In fact, SMAs are probably the most used indicators in Forex. Bollinger Bands make use of MAs. It uses it in combination with volatility markers. That way, you have a very effective indicator.
How it looks on charts
Here you do not have a normal bar graph or a histogram. In fact, here you have envelope like formations. It looks like expanding and contracting envelopes. Now the extent of those formations depends on price. It has two boundaries. These represent the SDs. The SDs are standard deviations on either side of the moving average. You just need to keep an eye on these for Forex maximum profit.
Settings for FX trading maximum profit
Now there are various settings that work for traders. One such setting is explained here:
• First you need to make use of SMA. So it’s best to set it to a 20 period.
• Now take a good currency pair. The Euro/US Dollar seems to be a good one.
• This can now be put to a 5-minute chart for Forex trading maximum profit.
• In case of volatility, the band spreads wide.
• When volatility decreases, the bands converge towards the center.
• Again there can be a volatile period.
In Bollinger Bands, price tends to go back to the middle. This is partly due to the reason that these bands act like dynamic levels of support and resistance. So if you put in a longer period of time frame, the bands get stronger.
This is another similar concept. Whenever a breakout is upcoming, bands squeeze closer. Therefore, candles continue an upward journey when they break above the top band. Similarly, they continue downwards when they break below lower bands.
Now depending on these trends, one has to make out the signals. During strong trends, people should act on their positions. Of course, you can’t expect them to be correct all the time. There’s no indicator that can achieve that. But Bollinger Bands has a great record in this regard.
Also, the simplicity of use is a good factor. Traders love the fact that one can understand its working easily. Therefore you even have rookies trying this out. It has worked out for many as well. So when you use Bollinger Bands, you can expect Forex trading maximum profit.
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